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Coupons and other Dollar Stretching Exercises

Posted May 16, 2008

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Dollar Stretching exercises adopted by consumers to save money during the hard times.

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Soaring prices are moving consumers to learn how to stretch their spending money. The April LJS national survey finds that 71% of consumers try to make their food dollars go further by employing an average of 2.37 of the following five shopping strategies:

Reading newspaper for advertised specials (57%)
Using coupons (58%)
Buying more store brands (50%)
Switching brands to get a lower price (42%)
Stocking up at warehouse stores (32%)

The article, $4 Gallon Gasoline now posted on 8sages.com, discusses strategies that consumers have adopted to save money on gasoline as the price of oil ratchets up to a record highs of over $135 a barrel.)

Dollar stretching is a decreasing function of income. The intensity of the effort, as measured by the number of strategies employed to make food dollars go further, ranges from a low of using 1.78 ways to stretch dollars for upper income consumers to 2.46 ways for middle income, 2.54 ways for working class income, and 2.76 for those in poverty.

A quarter (24%) of upper income consumers do not use any of the five strategies for saving money. By contrast, only 10% of middle and working class consumers say they make no effort to save, and only 8% of those in poverty say they make no effort to save on food.

Black consumers, in line with their generally lower incomes, utilize more saving strategies (2.65) than Hispanic (2.07), White (2.42), or “Other” (1.88) consumers.

It is interesting that Hispanic consumers, despite incomes typically lower than the general population, employ fewer strategies on average than the general population to make their food dollars go further. This relates in part to language barriers. The percent of consumers reading newspapers to find specials is lower among Hispanics (48% vs. 57% than for the general population). Similarly, use of coupons is lower among Hispanic consumers (47%) than for the general population (58%).

Couponing

Responding to consumer distress at being unable to afford to sustain spending, the Sunday edition of the Arizona Daily Star regularly runs a red letter ad above its front page headline that offers consumers $92 worth of coupons in a paper that sells for $1.50.

On the not-too-distant horizon, the availability of coupons – as well as the ease with which they can be redeemed – is about to be enhanced. A March 13, 2007 SAGE ADVICE column posted on Editorandpublisher.com announces “Newspapers Caught in Web as Clippers Click E-Coupons” (Still available by clicking here. ) A year later, the technology for clicking rather than clipping coupons is closer to reality.

Cell phones are already used in other countries to display coupons with bar codes that can be read and redeemed by retail store scanners. Kroger has scheduled a test of such cell phone coupons.

A report from Reuters titled " Paper is passe for tech-savvy South Koreans

(Reuter life!) Young, tech-savvy South Koreans are making coupon clipping a thing of the past and turning to their mobile phones instead.

Some of the fastest -growing mobile phone services in the country let retailers send discount coupons and users send gift certificates for anything from lattes to movie tickets through their handsets.

The merchandise vouchers have a barcode embedded in teh message. Users show the coupon on teh screen and retailers scan the barcode to apply teh discount.

"People can actually receive products from places just by showing their phones," Ryu Mina, a spokeswoman with mobile service provider SK Telecom.

Our April 2008 survey finds that a cell phone enhanced to receive coupons that can be redeemed electronically would – given equal performance and price – be preferred by one in five (19%) of consumers.

Ownership of such a cell phone enables the owner to recover a portion of their service charges from savings realized by redeeming coupons that are delivered to their cell phones for a wide variety of the products they purchase.

Types of Dollar Stretching Exercises Employed

The 32% of consumers who seek to save by stocking up at warehouse club stores employ, on average, more different ways to save (3.62 ways) than consumers who do not stock up at warehouse stores.

By contrast, the 58% of consumers who use coupons employ, on average, fewer ways to save (3.18 ways) than consumers who do not use coupons.

Financial Status

There are tight relationships between the way consumers elect to save and their financial status.

The Consumer Affordability Index (CAI) – which tracks whether consumers feel they can afford to maintain their current level of spending – is highest for consumers who seek to save by using coupons (83), buying store brands (81) and reading ads to locate specials (80). The CAI is lowest for those who save by switching to lower-priced brands (75) and by stocking up at warehouse store (77).

Demographic Characteristics

The proportion of college graduates is highest among those who save by stocking up at warehouse club stores (40%) and lowest among those who save by switching to lower priced brands (28%).

In terms of gender, the proportion of women is highest among those who save by reading ads to locate specials (59%) and by redeeming coupons (60%), and lowest among those who save by switching to lower priced brands (53%) and by shopping at warehouse stores (52%).

The proportion of those who are 50-64 years of age is highest among thse who stock up at warehouse stores (35%) and lowest among those who use coupons (30%) and switch to lower priced brands (30%).

The proportion of consumers of Hispanic origin is highest among those who switch to lower priced brands (15%) and is otherwise 10% or 11% among those stretching dollars in other ways.

View the statistics in the table »

Significance

Rising food prices combined with static and falling incomes limit consumer access to food for a major sector of the population. It is not surprising that consumers are engaged in serious efforts to reduce the cost of food by using coupons and other dollar stretching exercises. Nor is it a surprise that the cost of food is becoming a political issue.

Click on CONTACT US to request more detailed tabulations of the target markets for various ways to save covered in the survey. They will come to you via e-mail at no charge.

To secure information on target markets for ways to save not covered in the basic survey, click on CONTACT US to request information on cost of buying add-on questions to our survey that are of interest to you.

To be kept informed about further findings from ongoing research on this topic, contact 8SAGES.com.